Have the seller provide bank statements showing monthly deposits matching the amount he said each tenant has been paying. This will at least let you verify the amount and that they pay on time. Then you can establish new leases immediately upon taking possession.
@Colleen F. Thanks very much, I appreciate the insight!
@Mike Dorneman Glad you appreciated my insight as well.
@Brian Garrett - Sorry if your feelings were hurt Brian. I quickly reviewed the other post and responded to a great piece of advise I had yet considered.
I hope nothing else upsets you today.
@Mike Dorneman No problem I hope you can figure out how to verify tenants rents in the future.
@Brian Garrett Thank you Brian. With such insightful and creative ideas like that of the one you shared , I’m sure I will in no time. :) Enjoy your day, Sir.
@Mike Dorneman You may want to step back from investing and get back to educating. By the way estoppel agreements are not common in residential deals. Good luck to you!
@Brian Garrett The knowledge just keeps coming from you, Thank you.
In some states a "verbal" lease is a valid agreement for a specified amount of time. In my state, it's one year. Sure, there are all kinds of problems with this, but I'd find out what the laws are in your state- that way you can move forward with confidence.
Also- if you can't get tenants to pay the rents that the owner states they do, why not get rid of them? Unless the owner is lying about the rents, which I suppose is possible. If the rents you expect are close to market, you should be able to get good tenants in there who pay rent on time. Evictions are the most fun, but if it's a GREAT deal, don't let that stop you.
As Colleen said, Request Estoppel Certificates of the tenants which will confirm actual figures or give you the facts to make your decision to go through or not. They are very common in many areas, I’ve used them even on as small as 2 units in CA and nobody gets their feathers ruffled. In fact, it confirms to you what they expect to be paying.
Also, as Brian commented you can ask for monthly bank statements (ask for 12+ months) or even their schedule E of their tax returns they file with the income and expenses for the property.
Don’t be shy of asking for documents and doing your due diligence as the worse case is you don’t and find you bought a bad deal and really wish that you did.
Can't hurt to chat with a local landlord-tenant lawyer on how the laws in this city tend to operate, as far as verbal or other agreements. Also, I like the idea of asking for at least a month to month lease at closing. I'd definitely ask for seller's bank statements or proof of payment by tenants. Not an unreasonable request at all.